Tool 13 · the lab · Read: Ch. 21 — The Term Sheet
Term Sheet Negotiation Scorecard
Score each of the 16 key term sheet provisions. For each term, select whether it is Founder-Friendly, Market Standard, or Investor-Hostile to Founder. The scorecard generates an overall friendliness rating, flags the most punitive terms, and gives negotiation leverage notes.
Sourced from GoingVC Ch. 21 + Sutton Capital Term Sheet analysis framework.
Negotiation principles (Sutton Capital framework)
- Economic terms: Valuation, option pool, pay-to-play — highest leverage for founders
- Control terms: Board seats, protective provisions — often non-negotiable for top-tier VCs
- Liquidation stack: Non-participating preferred is standard; participating preferred with cap is acceptable; uncapped participating = red flag
- Anti-dilution: Broad-based weighted average is standard; full ratchet is punitive and rare post-2010
- Information rights: Monthly/quarterly financials are standard; audit rights are LP-facing requirements, not negotiable
- Drag-along: Should require majority of common + preferred threshold to trigger — not unilateral investor right